Bayonne Water Rates Spike After Privatization

January 5, 2017, 6PM EST

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556125561255612Bayonne Water Rates Spike After PrivatizationInstead of trying to upgrade the crumbling water infrastructure on its own, Bayonne forged a 40-year partnership contract with $150 million in up-front financing from the private Wall Street equity firm Kohlberg Kravis Roberts. Since then, rates have increased.2017-01-05 04:48 pmdisabled2365926988true

“I can’t afford it. You know, I just can’t afford it any more,” said Sandra Richardson.

Bayonne native Richardson walks dogs for a living and says she can’t keep up with her rapidly rising water bill. Rates have jumped almost 28 percent since Bayonne privatized its water utility in 2012.

“My last bill was over $400. Yeah for three months,” she said. “I think it’s ridiculous. I can’t afford, for something as basic as water.”

Residents complain and post bills on Bayonne Talks’ Facebook page. For people on fixed incomes, it forces hard choices.

What does Mark Schutte do without?

“TV, internet. You figure out how to cut down on a few things,” he said.

But the 80-year-old system needed millions in upgrades and — like many city councils across New Jersey and the nation — Bayonne’s had avoided biting that bullet for decades.

“And then suddenly, you know, they have to pay the piper. And they have to go in and do this work, and the rates go up significantly,” said New Jersey Division of Rate Counsel Director Stefanie Brand. “They get a large increase all at once and that’s much harder for ratepayers to bear.”

Instead of trying to upgrade the crumbling infrastructure on its own, Bayonne forged a 40-year partnership contract with $150 million in up-front financing from the private Wall Street equity firm Kohlberg Kravis Roberts. The city used that money to pay off old debts, dissolved its MUA and brought in SUEZ Water to run, maintain and upgrade the drinking, storm and wastewater facilities. SUEZ rep John Ludington says it found a rusted, leaking mess.

“And it was an infrastructure that was about to fail,” he said. “[The whole thing was] absolutely corroded. It was a corrosive environment, very damp and just years and years of neglect. So this is what the piping looks like now. It’s a major investment.”

SUEZ says initial repairs cost $17 million — more than anticipated — and it’s contracted to spend $2.65 million every year on more improvements, including new meters with electronic scanning that can pinpoint expensive leaks.

“Which is a big help, and we’ve gotten a lot of feedback — people are liking that program, because with the old meters, there was no way of determining there was a leak,” said SUEZ Water Supervisor Mike Jasinski.

But saving water won’t necessarily save ratepayers money because the contract guarantees a certain profit for KKR’s shareholders. The rate spiked more than 13 percent last year.

“We know we need to collect money, but I just felt that this was too much,” said Councilman Gary La Pelusa.

La Pelusa opposed the privatization deal. He says it’s resulted in liens being placed on some people’s homes for non-payment.

“And it creates a hardship, especially for seniors. I’ve heard a lot of seniors complain they just can’t afford their bills. The bills — the tax, the rates, the water rates — they’re going up faster than an increase in their pension or their Social Security,” he said.

“The critical question to me is not whether the rate increases will come, it is not whether the ratepayers will need to pay for these costs — because the costs are coming. It’s whether we can protect those who are in already poorer households,” said New Jersey Clean Water Council member Daniel Van Abs.

KKR said in a comment, “Our partnership with the city provided much-needed infrastructure upgrades, improved the city’s finances and the water system is in far better shape than it was when we first invested. Three state agencies and the ratepayer advocate reviewed the transaction and the predetermined rate formula with the needs of the city and the ratepayers in mind.”

Rates are slated to rise another 3.5 percent this month.

“I guess we kind of have no choice. Which is not really fair,” Richardson said.

Even as Bayonne’s decision to privatize ensures a steady stream of profits for corporations, it also ensures residents get a clean, safe but more expensive drinking water supply. And that may be the price financially strapped cities have to pay.

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